Malayan Banking Berhad v Vietnam Industrial Investments Ltd

On 30 September 2022, on the application of the plaintiff, Malayan Banking Berhad, Black J ordered that the defendant, Vietnam Industrial Investments Ltd, be wound up in insolvency and that David Mansfield and Matthew Donnelly be appointed joint and several liquidators of Vietnam Industrial.

On that occasion, Black J also made the following orders:

The reasons given by Black J for making these orders are expressed in Re Vietnam Industrial Investments Pty Ltd [2022] NSWSC 1411 (Vietnam Industrial Judgment).

Malayan Banking has now applied pursuant to the liberty granted on 30 September 2022 for an order that the liquidators of Vietnam Industrial reimburse Malayan Banking out of the property of Vietnam Industrial for costs in the amount of $233,628.32 on an indemnity basis or, alternatively, $198,566.77 on an ordinary basis, and the costs of the assessment and this application in the amount of $32,412.00.

The liquidators of Vietnam Industrial have been provided with notice of this application, have not provided any submissions in respect of it and have confirmed that they neither consent to nor oppose the application.

Malayan Banking is a licensed bank incorporated and located in Malaysia. Maybank International Labuan Branch (Maybank Branch) is a subsidiary of Malayan Banking also located in Malaysia. Malayan Banking is the plaintiff in the proceedings. Maybank Branch was a supporting creditor in the winding up proceedings.

Vietnam Industrial was registered as a corporation in Australia and is a former public company and the parent company of various entities registered in Singapore, Vietnam and the British Virgin Islands. SSESteel Ltd, registered in Vietnam, is one of those entities, being a wholly owned subsidiary of Structure Steel Engineering Pte Ltd, which in turn is a wholly owned subsidiary of Vietnam Industrial.

On 12 May 2005, Malayan Banking and SSESteel Ltd entered into the Credit Facilities Agreement pursuant to which Malayan Banking granted credit facilities of up to US$9,430,000 to SSESteel Ltd.

On 20 October 2008, Malayan Banking and Vietnam Industrial entered into a Corporate Guarantee and Indemnity agreement (Malayan Guarantee and Indemnity). Under the Malayan Guarantee and Indemnity, Vietnam Industrial agreed to pay Malayan Banking, upon Malayan Banking’s first demand in writing (cl 1):

By cl 16 of the Malayan Guarantee and Indemnity, Vietnam Industrial also undertook:

On 17 July 2016, Maybank Branch and Vietnam Industrial entered into a further Corporate Guarantee and Indemnity agreement (Maybank Guarantee and Indemnity). The Maybank Guarantee and Indemnity is in substantially similar terms to the Malayan Guarantee and Indemnity.

On 24 December 2021 and 6 May 2022, Malayan Banking and Maybank Branch each issued a letter of demand to Vietnam Industrial seeking repayment of a debt payable by SSESteel Ltd, pursuant to the Malayan Guarantee and Indemnity and the Maybank Guarantee and Indemnity respectively.

On 29 July 2022, Malayan Banking served a statutory demand on Vietnam Industrial. Vietnam Industrial did not apply to set aside the statutory demand or make payment of the debt referred to in it.

On 12 August 2022, Maybank Branch served a statutory demand on Vietnam Industrial. Vietnam Industrial did not apply to set aside the statutory demand or make payment of the debt.

On 24 August 2022, Malayan Banking filed an originating process in this court seeking orders that Vietnam Industrial be wound up in insolvency and that liquidators be appointed (Winding Up Application). Maybank Branch did not apply to wind up Vietnam Industrial but was a supporting creditor to the Winding Up Application.

On 23 September 2022, Vietnam Industrial’s solicitor (Joseph Abberton of Lavan) sent a letter to Malayan Banking’s solicitor (Masiullah Zaki of Squire Patton Boggs) serving a notice of appearance and seeking an adjournment of 4 weeks of the hearing of the Winding Up Application.

The Winding Up Application was listed before Registrar Walton on 26 September 2022 and referred to Black J for hearing on the same day.

On 26 September 2022, Mr Abberton applied to the court for an adjournment on the basis that he had only recently received instructions and that Vietnam Industrial might oppose the Winding Up Application. Black J adjourned the hearing to 29 September 2022.

On 26 September 2022, Squire Patton Boggs sent a letter to Lavan stating, amongst other things, that Malayan Banking was incurring significant costs and expenses in the proceedings and seeking a written undertaking by 3:30pm that day that Vietnam Industrial would not appoint or purport to appoint any voluntary administrators before the hearing on 29 September 2022.

On 26 September 2022, Squire Patton Boggs sent a further letter to Lavan requesting that Vietnam Industrial inform them of a number of matters, including any proposed or purportedly appointed voluntary administrators and any restructuring, reorganisation or other plan by which the significant debt owed to Malayan Banking and Maybank Branch would be repaid, secured or compromised.

On 28 September 2022, Vietnam Industrial filed an application in the High Court of Singapore (Singapore proceedings) seeking to invoke a moratorium available in respect to a scheme of arrangement to restructure the company under the Insolvency, Restructuring and Dissolution Act 2018 (Singapore). There is no evidence that Malayan Banking was informed of this restructure proposal as it had requested.

On 29 September 2022, the Winding Up Application was listed before Black J and Vietnam Industrial sought an adjournment to allow further evidence to be prepared on the proposed Singaporean restructure and its nexus to the Winding Up Application. Black J adjourned the hearing of the adjournment application and the Winding Up Application to 30 September 2022.

On 30 September 2022, the adjournment application and Winding Up Application were listed before Black J. His Honour declined to adjourn the Winding Up Application, finding that the restructuring proposal did not exist in any developed form and in circumstances where Vietnam Industrial needed time to develop a proposal which had not been developed in the two years since Vietnam Industrial’s potential insolvency was first identified by auditors, it was wholly speculative whether any such proposal would be advantageous to Vietnam Industrial’s creditors (Vietnam Industrial Judgment at [16]). In determining the Winding Up Application, Black J found that because the presumption of insolvency arose on the unsatisfied prejudiced statutory demand of Malayan Banking and Vietnam Industrial did not lead any evidence of solvency, the winding up orders should be made (Vietnam Industrial Judgment at [22]–[23]). Orders were then made that:

On 28 October 2022, the Singapore proceedings were listed before the High Court of Singapore.

Maybank Branch appeared at the hearing and opposed the application on the basis that the liquidators of Vietnam Industrial did not support the Singaporean restructure, the Vietnamese subsidiaries of Vietnam Industrial were not liable to be wound up in Singapore and the restructuring proposal had not been sufficiently developed to allow the creditors or the court to assess its feasibility.

On 28 October 2022, the High Court of Singapore made an order dismissing the proceedings in relation to SSESteel as the entity liable for the debt and ordered that:

As part of the High Court of Singapore’s orders on 28 October 2022, Vietnam Industrial and its subsidiaries, which were subject to various other applications in the Singapore proceedings, were given a further period of six months to develop a restructuring proposal. There is no evidence that any substantive restructuring proposal was put to Vietnam Industrial’s creditors or to the High Court of Singapore.

On 11 May 2023, Vietnam Industrial’s solicitors in Singapore (Vanathi Ray, Alston Yeong and Daniel Huang of Providence Law Asia) sent a letter to the High Court of Singapore seeking leave to withdraw the application in the Singapore proceedings and confirming that the liquidators did not consent, or support any proposed extension, to the moratorium.

Section 98 of the Civil Procedure Act 2005 (NSW) (CPA) relevantly provides:

In Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213, Giles JA at [21] said (citations omitted):

In Hoho Property Pty Ltd v Bass Finance No 37 Pty Ltd [2022] NSWSC 1062, Rees J at [12]–[15] summarised the principles pursuant to which the court should approach the task of calculating the gross sum that should be awarded as follows:

In undertaking the exercise of calculating a gross sum, in Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121, JC Campbell AJA at [7] said (citations omitted):

The Court of Appeal of this court recently reviewed and summarised the principles governing the discretion to award costs on an indemnity basis based on the conduct of a party in Cappello v HomeBuilding Pty Ltd [2023] NSWCA 109. In Cappello, Mitchelmore JA (with whom Simpson AJA and Meagher JA agreed) at [46]–[48] observed:

The principle of whether the court should award indemnity costs arising from a contractual entitlement to the recovery of costs on that basis has also been considered on a number of occasions by this court.

In Rail Corporation New South Wales v Leduva Pty Ltd [2005] NSWSC 138, Nicholas J at [27] applied the approach in Gomba Holdings (UK) Ltd v Minories Finance [1993] Ch 171; [1992] 4 All ER 588 at 194, that ordinarily the court’s discretion as to costs should be exercised so as to reflect the contractual right. This principle was approved in Abigroup Limited v Sandtara Pty Limited [2002] NSWCA 45, by Stein JA at [9]:

In Kyabram Property Investments Pty Ltd v Murray [2006] NSWSC 54, Campbell J made an indemnity costs order, stating at [17]:

In Dee-Tech Pty Limited & Anor v Neddam Holdings Pty Limited (No 2) [2012] NSWSC 517, White J held that the contractual qualification for “reasonable legal costs” did not justify making an indemnity costs order, for the following reasons expressed at [44]–[46]:

In A1 Catering Services Pty Ltd v Manassen Holdings Pty Ltd (No 2) [2024] NSWSC 530, Richmond J at [17], awarded indemnity costs arising from a contractual entitlement, stating the principles as follows:

In A1 Catering Services, Richmond J distinguished the decision in Dee-Tech on the basis that the contract under consideration in that case did not contain any qualification of “reasonable legal costs”, stating at [19]–[20]:

I am satisfied that because Vietnam Industrial has been wound up in insolvency it is appropriate for me to approach the award of costs in favour of Malayan Banking by ordering those costs as a gross sum rather than as assessed costs pursuant to my discretion under s 98(4)(c) of the CPA. It appears to me that Vietnam Industrial as the party obliged to pay the costs of Malayan Banking would not be able to meet a liability of the order likely to result from the assessment.

The costs application is supported by the affidavit of Ian Ramsey-Stewart sworn 24 April 2024. Mr Ramsey-Stewart has been a solicitor admitted to practice in this court for 29 years and for the last 22 years he has practised solely in the area of legal costing. In that time, his experience in legal costing extends over approximately 2,300 costing matters. Mr Ramsey-Stewart has provided his independent expert opinion on the properly incurred and reasonably recoverable professional costs and disbursements if they were awarded on a party/party basis and on an indemnity basis.

Mr Ramsey-Stewart has calculated the total incurred costs of Malayan Banking at $398,459.83, from which he has deducted $141,287.01 incurred for professional costs and disbursements for work undertaken in a separate jurisdiction, being Singapore. This leaves the total amount of costs to be claimed by Malayan Banking in these proceedings as $257,172.82.

The calculation of costs has been undertaken by Mr Ramsey-Stewart on the basis that the services supplied by Squire Patton Boggs to Malayan Banking were not subject to GST under Item 2, s 38-190(1) of the A New Tax System (Goods and Services) Tax Act 1999 (Cth) because they were supplied to Malayan Banking, a non-resident with no presence in Australia. I agree with this approach.

Mr Ramsey-Stewart considers the hourly rates charged by the solicitors for Malayan Banking (Squire Patton Boggs) of between $200 and $870 based on seniority of experience as reasonable market place rates charged in the Sydney CBD for litigation proceedings of the type and complexity involved in these proceedings. He also considers that the hourly rates of counsel to be reasonable.

Mr Ramsey-Stewart has also expressed the view that the work undertaken by the solicitors at Squire Patton Boggs was appropriately delegated so as to reduce the overall costs by having a limited number of them working on the matter and the work allocated to team members with lower charge out rates.

Mr Ramsey-Stewart has expressed the opinion that he would expect reductions on an ordinary costs assessment which would result in a recovery of 75% of professional costs, 95% of counsel’s fees and 100% for general disbursements. Mr Ramsey-Stewart’s estimated reductions on a costs assessment on an indemnity basis would result in a recovery of 90% of professional costs, 97.5% of counsel’s fees and 100% for general disbursements.

Mr Ramsey-Stewart has calculated that the amounts of fair and reasonable costs on an ordinary basis for each component as follows:

Mr Ramsey-Stewart’s calculations of the amounts of fair and reasonable costs on an indemnity basis for each component are as follows:

These calculations result in a total expected recovery of $198,566.77 (exclusive of GST) if the costs of Malayan Banking were assessed on an ordinary basis and a total expected recovery of $233,628.02 (exclusive of GST) if the costs were assessed on an indemnity basis.

Malayan Banking has submitted that indemnity costs should be awarded for the following reasons:

It appears that cll 1 and 16 of the Malayan Guarantee and Indemnity together provide contractual entitlements for Malayan Banking to receive payment of “all legal costs and expenses on a full indemnity basis” and “all whatsoever cost, charges, fees stamp duty and other disbursements (including the professional charges of [Malayan Banking’s] solicitors on a full indemnity basis” from Vietnam Industrial, and that recovery of such costs are not subject to any limiting factor such as “reasonable legal costs”, party/party costs or costs on the ordinary basis.

In the circumstances, applying the approach summarised in A1 Catering Services, I consider that significant weight in the exercise of my discretion should be placed on Malayan Banking’s contractual entitlement to the payment of its costs on an indemnity basis.

I also consider that it was unreasonable in the sense described in Cappello for Vietnam Industrial to approach the opposition to the Winding Up Application by seeking to delay the hearing of the Winding Up Application, in circumstances where it had no evidence capable of rebutting the presumption of insolvency, by reference to a speculative restructuring. This approach caused Malayan Banking to incur unnecessary costs and expenses in the prosecution of the Winding Up Application (which it drew to Vietnam Industrial’s attention on 26 September 2022) for which it should be fully reimbursed.

Accordingly, I propose to order that the gross sum costs to be awarded to Malayan Banking should be calculated on an indemnity basis.

Mr Ramsey-Stewart has also calculated that the fair and reasonable costs for the preparation of this application total $32,412 (excluding GST), comprising the costs of Squire Patton Boggs in the amount of $19,412 (excluding GST) together with the fees charged by Mr Ramsey-Stewart for the preparation of his opinion of $13,000 (excluding GST). I consider that the amount of $32,412 (excluding GST) should be added to the gross sum costs to be ordered by me.

In my opinion, the approach to be adopted by me in calculating the gross sum costs should follow the considered and soundly expressed opinions of Mr Ramsey-Stewart in relation to the recovery of costs on an indemnity basis.

This makes the gross sum costs to which Malayan Banking is entitled a total of $266,040.32 (exclusive of GST), being the amount of $233,628.02 (exclusive of GST) for the Winding Up Application and $32,412 (excluding GST) for the preparation of this application.

For the reasons expressed above, I propose to make the following orders: